Quito sin los Otros

During the last three decades of the twentieth century, British banks abandoned international aspirations, consortia and efforts to become a ‘global financial supermarket’ to focus on providing a diversified offering in UK retail finance (Bátiz-Lazo and Wood, 2000). Building societies continued to consolidate, remained the main providers of mortgage loans and after 1986, diversified into other areas of consumer finance. A key element of these processes was office mechanisation and automation of service provision on the back of computer technology. In this context, the emergence of cash dispensers and their transformation into ATM help better understand a number of changes. Firstly, how the process of mechanisation leading automation begins to abandon the search for greater efficiency in discrete processes (such as the accounting function). Activities begin to be redefined from first principles hoping to gain greater effectiveness in operation. Secondly, the retail bank and building society branch ceases to exist as the main (and sole) point of contact with retail clients. Contrary to popular accounts (e.g. Cortada, 2006: 41) and as suggested in Bátiz-Lazo and Wood (2002) and Bátiz-Lazo and Wardley (2007), retail financial intermediaries began to change their mode of operation and retail customers’ access to bank markets long before the advent of the internet. This is evident as the ATM expands the retail branch service hours, economising in labour costs and increasing customer convenience (including, for the first time, the possibility to bank at any retail branch). But ATM emerges as an ‘experiment’ of banks. A purposeful strategy which aimed to develop retail branch and non-retail branch locations from the outset and which is mediated by advertising and capital budgeting. This is not a response to an ‘impending need’ of a more mobile population.

Along side changes in service delivery, shared ATM networks enable individual banks and building societies to expand geographically. Although restrictions for geographical expansion of retail branches were more important in US market, opportunities opened in both sides of the Atlantic for financial intermediaries and individuals to interact through different spaces (e.g. ATM, post, telephone and internet) and media (i.e. synchronous and asynchronous communication). Synchronous and asynchronous interaction was possible as banks move away from working directly together with individual customers, to allow

their computers working with individuals (as in the case of the ATM), bank staff working with the individual customers’ computer, as well as the working of computer to computer communication. The emergence of ATM networks was key in the development of information technology infrastructure (hardware, software, skills of individuals and organisational learning) which later on enabled other spaces and ways of interaction. Thirdly, there was a consistent and sustained effort of the main clearing banks to support the development of proprietary networks. This even after the ‘tipping point’ of ATM adoption had been passed. As opposed to the example in the US, interconnectivity is slow to develop in Britain. It seems to develop more as a result of competitive pressures than the potential to achieve economies of scale. In this sense, proprietary ATM networks should be seen as being perceived as a source of competitive advantage by clearing banks.

Later on, building societies embrace ATM technology in force following regulatory change s and a drive to diversify throughout British financial markets. Sharing ATM networks made sense for the building societies as a way to resolve apparent scale disadvantages. At the same time, economies of scale and the potential for the machines with greater traffic to make net fee income contributions seem to have been a key incentive for those with larger proprietary networks to support the emergence of total interconnectivity. In this process, the ATM becomes a threshold competency in retail finance when shared networks replace proprietary networks. A move which also comprises the emergence of standardised, high volume, high margin retail financial services (i.e. commodities).

Fourthly, except for De La Rue’s invitation to Barclays, during the initial period of adoption banks largely sought manufacturers that would design the new technology. Choice of functionality and manufacturer empowered individual banks to influence the evolution of design rather than having to accept technological solutions determined by manufacturers. As expected by Galbraith’s (1967) ‘reverse sequence’, banks proceeded with caution, committing to a limited number of machines and conducting market research (i.e. pilot test) at carefully thought-out locations. There is evidence of this behaviour in the strategies of Barclays Bank and Lloyds Bank in the 1970s but also in the

1980s around the Woolwich. Staff at banks advised manufacturers of changes in design while engaged advertising and finance staff to ensure success of the new offering.

But individual choice and market controlled were limited as new designs incorporate international standards (e.g. plastic cards, magnetic stripe, electronic exchange protocols). Manufacturers then offered designs with a number of modular options from where they could chose. This is clearly more evident in the processes of building societies, that is, the ‘late comers’ to ATM technology (which, incidentally, benefited from lower capital expenditure around a tried and tested technology).

One important actor missing from this story is the bank regulator as well as monetary authority. Just as there were changes in the culture and habits of retail bank customers and within the organisational milieu of financial intermediaries, automation on the back of computer technology brought about the changes in the money supply and monetary control. For instance, joint ATM networks imply the creation of electronic fund payments systems (EFPS) protocols. Automation also had a potential impact on the balance between cash deposits and non-cash deposits as well as in preferences of cash at hand. The ATM also associates with a change from payments in cash and checks to the predominance of plastic and digital payments on the back of credit and debit cards. For most of the period examined in this paper, the Bank of England assumed the roles of bank regulator and shared that of monetary authority. As had been the case in the US, ‘it would be difficult to overestimate the influence of regulatory bodies and laws in the character and practices of the Financial Sector.’(Cortada, 2006: 15). When and how did the Bank of England became interested in the ATM and the emergence of EFPS in retail financial markets has yet to be documented.